BloodhoundBlog

There’s always something to howl about.

Month: January 2007 (page 1 of 9)

January 31, 2007

Overcharging? A dedicated Realtor is a bargain . . .

by

Suburban Phoenix Real Estate Broker

Author website

Attorney Craig Blackmon issues a testy remark in a comment today, but the truth is, I could not be happier to discuss the underlying issue.

Sez Craig:

Well, it appears that even the “full service” agents are overcharging just a wee bit. It turns out that a successful agent must rebate nearly $69,000 a year to clients in order to charge a “fair” fee for the service. With this sort of transparency, I’m not sure Redfin has such a poor business model — at least they overcharge less.

I rebated more than half that amount in Q4 ’06 alone, so the number is not impressive to me.

Here is a number that has a very high priority for me today: Three.

That is the number of attorneys in two different states who tried with all their might — and failed — to kill one of my transactions.

They weren’t really trying to kill the deal — they were just being lawyers: Clumsy, stupid, ham-handed and — most particularly — slow. It took more than two weeks for the three of them to work out how to remove a bogus lis pendens that should never have been a cloud on the title in the first place.

I’m pretty sure each one of them made more on the house than I did.

But the important thing is, we closed the deal. A real estate attorney would have either killed the deal or bled the buyer white — for months. Lazy-for-less Redfin would have killed the deal. We closed today and my buyer moved in because I refused to let the transaction die.

I get paid for results, not ergs of energy expended nor drops of sweat spilled nor towering piles of paperwork. Results — not my time, not information, not obsequious service. I only get paid when I actually do the job I was hired to do.

Erg for erg, hour for hour, I lost my ass on this deal. But I don’t measure my life that way. I don’t have a job. I don’t get to eat one sesame seed every time I press the big red button. I work for days Read more

January 31, 2007

Bank Relationships vs. Mortgage Brokers

by

Real Estate Investor

Author website

Every property I have ever purchased has been with the help of a mortgage broker. After my recent trip, I have started to wonder why this is the case. The obvious answer is simply their access to cheaper capital. Brokers can secure rates 50 to 100 basis points (.5%-1%) lower than most local and national banks. Additionally, the terms tend to be more investor friendly, with longer amortization and no recourse. With all of these benefits, why would anyone consider going anywhere else?

The answers lie in two things: Technology and Relationships. The easiest explanation is simple disintermediation through technology. The Internet has opened the mortgage world to investors by allowing them to search many national and local bank rates, as well as, look across the country for the most aggressive mortgage lenders. The time will come (probably very soon, if not already) when some forward thinking investor will provide a site that connects investors and lenders in the same way mortgage brokers do now (think Lending Tree for Commercial Loans).

Additionally, looking at Brian Brady’s recent post, Interview: The XBroker, the industry seems poised for positive transparent change. This change will further allow disintermediation and provide investors unparalleled access lenders. Furthermore, increases in information will drive down pricing. I have consistently been quoted prices in the 1% (of loan value) range for broker services, which can be fairly steep as a percentage of closing cost when purchasing properties in the $500,000 to $1,000,000 range. I would love to see this come down to 50 to 75 basis points (sorry to the brokers out there, but business is business).

The less obvious answer is relationship building. I probably mention that real estate is a relationship business in 90% of my post because I really believe this. This concept is no different when working with banks. The value of the relationship, however, is not apparent right away. Most banks have specific lending criteria and will only be able to offer certain terms based on their risk assessment model. This fact alone keeps mortgage brokers employed. What investors fail to realize, Read more

January 30, 2007

Redfin and the antics of the INTx crowd . . .

by

Suburban Phoenix Real Estate Broker

Author website

By my lights, one of the most interesting bits of news to come out of Inman Connect was Redfin’s announcement that they plan to swim into Boston Harbor. Washington State has reasonably normal wild-West real estate laws, as does California. The natural leap, in terms of maintaining a decent level of sanity over legal compliance, would be to migrate to nearby states — Nevada and Arizona leap to mind.

There is a problem with this idea, though. The median home price in Phoenix is around $260,000. In Las Vegas, the median is around $300,000. If Redfin proposes to give back two-thirds of a $9,000 commission, there is a word for what’s left: Doodly.

Unlike a true bottom-feeder, Redfin has encysted itself with a boatload of dead-heading barnacles. This is why it keeps trying to grow into luxury markets: The company needs one third of a bigger commission bite even to make a pretense at covering its inflated payroll.

Kris Berg points out today that this is a less than brilliant strategy, inasmuch as buyers and sellers of luxury homes are busy people who have the money to pay for the kind of roll-out-the-red-carpet service they have come to expect. “We do nothing for less” is not a winning value proposition, generally speaking, among prosperous people.

There is an exception to this rule, however. Kris hints at it by suggesting that younger people might be attracted to Redfin. They might, but few of them are buying or selling at the $500,000 level and above. Redfin actually sends a stronger hint by announcing their plans to jump to Boston.

A couple of months ago, I was on the phone with Galen Ward. He suggested to me that, while Redfin’s approach to the marketplace was only popular with hi-tech Seattlites for now, eventually they would be seen as early-adopters and the business model would meet broad acceptance in the marketplace. This is a colorable proposition, I suppose.

Just after Inman, I mentioned on Rain City Guide that I thought Move, Inc’s. Alan Dalton had mopped up Redfin’s Glenn Kelman in their debate. The example I offered was this: If you Read more

January 30, 2007

Tick Tock — The Retirement Clock Is Counting Down

by

Real Estate Investments Broker

Author website

One way or the other, the day you retire will be an emotional one. Why don’t you kick back tonight after dinner, and quietly imagine your last day at work. How does it feel? Are you giddy with anticipation? Or are you tense and uneasy, filled with anxiety about your status quo?

Do you see yourself on the beach somewhere in the South Pacific? Or do you see yourself moving in with your son and his wife — the one you’ve never, well…….you know.

Big Ben

Are the sounds of your imagined retirement full of dance toons, island surf, and the laughter of good times? Or do you hear the endless droning of your only entertainment — TV?

Outside of maintaining your health, the most important decision in your life from this day forward is what kind of retirement you’re going to proactively provide for yourself.

For so many people today, retirement has turned out to be nothing like they imagined. It’s turned out to be more like a sentence. Once you retire, sans a winning lottery ticket, your future is cast in concrete.

Now imagine it’s tomorrow and you’re reordering your priorities. Keep in mind just how much quiet suffering is being endured by folks now retired, who never planned for it. “Hurry up honey, Jeopardy’s starting!”

20 to life is a long time. You had a lot longer than 20 years to plan for it. Now you have less time. Now that ticking clock is beginning to sound like Big Ben. Tick tock, another year. How much time do you have?

How do you feel about making that time count?

January 30, 2007

Ladies and Gentlemen – Meet the Flintstones

by

Realtor, Associate Broker

Author website

In the evolutionary chain of technology, I am somewhere between the Greg Swanns and Dustin Luthers of this world and, well, the Flintstones. Let’s just call me the missing link.

My generation wasn’t born into a world where computers, much less websites and blogs and mash-ups and code, existed. With each new technological advancement, we boomers learned to adapt or face extinction. The majority of us have learned just enough to be dangerous; given enough interest and perceived benefit, we have watched those around us and learned to apply the tools as they were introduced into our society. As for our parents and grandparents, meet the Flintstones. For many (most) of this segment, information technology was introduced too late in their era. My grandmother loves her computer to play Solitaire, but you will never find her converting a PDF to a JPEG or hanging out in a chat room. For all practical purposes, she is a dinosaur. Then there are our children. They have never know a world without personal computers, digital cameras, scanning and faxing. They will not remember a time without YouTube or MySpace except when these things are replaced with more advanced applications.

So, here comes the Redfin segue. Steve and I have been having some lengthy discussions lately about the Redfin model and its potential for broad success. Sure, we are a little short in the recreational-life category, but it has been a topic of discussion because I was recently invited to meet with Redfin CEO Glenn Kelman to “chat”. This being the eve of that meeting, it seemed apropos to reflect on the topic.

From my vantage point, this is the $64 question: How will Redfin succeed where so many others have failed? Or, rather, who is their audience? HelpUSell, Zip Realty and other discount business models have had a limited audience at best; they are not, nor do I believe they will ever be, setting the world on fire and achieving significant market share. Of course, Redfin is approaching the issue from a standing-on-their-head perspective. While they pay lip service to the listing side of the equation, their Read more

January 30, 2007

To the attention of Mr. John and Ms. Jane Sucker, taxpayers: You’ve been had . . .

by

Suburban Phoenix Real Estate Broker

Author website

Sorry you were the last to know…

From the Las Vegas Review Journal:

The Las Vegas Monorail saw ridership collapse by more than 30 percent in 2006, capping a disappointing year with its worst ridership month ever in December, according to monorail statistics.[…]

Nonetheless, monorail officials Monday took an optimistic view.

“The monorail’s current daily ridership of approximately 20,000 riders still far exceeds most rail systems throughout the country,” said Ingrid Reisman, a spokeswoman for the Las Vegas Monorail Co.

The good news for taxpayers in Nevada is that they haven’t — yet — been stuck with the bill for this white elephant. Don’t you wish you had good news where you live?

Tell the truth: Wouldn’t you be willing to settle for an accurate accounting of the taxpayer subsidized losses of your local mass transit system…?

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January 30, 2007

The Savvy Investor: Watchouts for New Market Investing

by

Real Estate Investor

Author website

You may have noticed my absence Thursday and Friday, while I was in sunny Greensboro, North Carolina (sunny as oppose to Ithaca, NY). While the trip was a short four days, I met tons of contacts and had a very interesting introduction to the market. There are so many things to talk about, I am going to break them up by topic and try to write them up over the next couple of days. Today, I want to talk about the savvy investor.

I began the journey meeting my agent at the airport. I worked very hard in selecting an agent that I thought would offer me a good look at the market, with an objective opinion on pricing. My goal is to always try to choose an agent, who has experience in the market and is hopefully equally savvy (or more so).

The first problem I encountered right away was a language barrier. I thought cap rates were the universal language, so I assumed that all commercial pricing would be based on local cap rates. Wrong! My agent informed me that the pricing assumptions in Greensboro were based on an assumed appreciation rate of 1-2.5% a year. Interesting… As I stretched my mind to try to understand this concept, I made an assumption that rents would be increasing by at least that or that despite what I saw with my eyes there was a rush on small apartments in Greensboro. Of course, neither was the case.

Interestingly enough, when I made some calculations based on my own models most of the properties I looked at were in the 6.5-7.5% cap range. Although the rates seemed very aggressive for the Greensboro area, every property I looked at fell into this range. My next stop was a commercial mortgage lender. As I sat down in his office, I wondered if everything I had learned in life and in school did not apply in the town of Greensboro or if other investors were just plain crazy. I say this specifically because of all the properties I looked at only one of them was actually Read more

January 30, 2007

Transparency And The Wizard Of Oz

by

Real Estate Marketing Executive

Author website

OZ’S VOICE: Do not arouse the wrath of the Great and Powerful Oz! I said — come back tomorrow!

I bought my first house in 1984 when I was 22 years old. It was in Speedway, IN. I do not remember much about the detail of the transaction, but I do remember sifting through the classifieds of the newspaper, trying to get a feel for what I might be able to afford. I remember feeling lost. I didn’t know anyone in the real estate industry or where to begin, so I began calling around for someone to assist me. I had no clue what to look for. If someone had said, “come back tomorrow,” if I wanted the information, I would have had to come back tomorrow. How else was I going to get what I wanted?

When I look back, I’m amazed at how little control we as consumers had over what we were shown. I don’t remember giving it a second thought at the time. The real estate agent was like the Great and Powerful Oz. I was just happy to have a sitting.

DOROTHY: If you were really great and powerful, you’d keep your promises!

OZ’S VOICE: Do you presume to criticize the Great Oz?

[Toto pulls back the curtain to reveal the Wizard at the controls. The Wizard is unaware]

OZ’S VOICE: You ungrateful creatures! Think yourselves lucky that I’m giving you audience tomorrow, instead of twenty years from now!

[He turns, looks and sees that the curtain is gone — reacts and turns back to the controls]

OZ’S VOICE: Oh — oh oh! The Great Oz has spoken! Oh — Oh…

[The Wizard pulls back the curtain]

I get it. The Wizard had a great gig. Who’d want to give up being the Great and Powerful Oz? I know why he’d want to pull back the curtain. I know why he’d try to pretend no one saw him. Wouldn’t you do the same thing?

And I can understand why real estate agents were reluctant to move boldly to the Internet, to give up the information. I mean, for goodness sakes, they were Read more

January 29, 2007

A Selfish Case for National Originator Licensing

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

There is a movement to create a national licensing platform for loan originators similar to the one the National Association of Securities Dealers (NASD) requires for registered representatives.

Supporters of this movement claim that originators must be licensed because the quality of advice given to the consumer is woefully inadequate. Those supporters cite a need for background checks, testing for professional competency, and continuing education to protect the consumer against predatory lending and unsuitable loan recommendations.

Opponents of this movement,, most notably, the National Association of Mortgage Brokers (NAMB), claim that a national licensing platform is “fatally flawed” because federally-chartered banks and their subsidiaries are exempt from any regulation other than the Office of Thrift Supervision (OTS). They argue that while they support it in principle, unless the banks “level the playing field” , licensing is unfair to the independent originator.

I’m all for the national licensing, in spite of the controversy, but not for the reasons you might think.

Will national licensing reduce the number of originators out there? Sure it will. You can’t swing a dead cat without hitting an originator in Southern California today. Everybody has a business card with “mortgage” or “financial” in the company title. The consumer has never had the number of loan choices as she has today. Consumers know at least 2-3 people “in the biz” and that gives them choices. I support the effort to nationalize licensed originators because it will dramatically reduce my competition.

Will licensing protect the consumer? Everybody complains that predatory lending is driving up foreclosure rates. Foreclosure rates are well below that average (although they have significantly spiked from the historical lows of two years ago). The fact is that over 95% of the mortgagors are doing just fine. Should the consumer be denied choices and face rising costs to subsidize the fringe borrower in trouble?

Will educational standards increase the service offering to the consumer? Lending is becoming a specialized business with originators defining certain niches. The era of “generalists” is coming to an end due to the sheer magnitude Read more

January 29, 2007

It’s Time To Take The Lead — Let’s Turn The Lights On Now

by

Real Estate Investments Broker

Author website

Growing up I remember the almost genteel civility practiced by my grandparents and their generation. Topics that today would more likely than not incite harsh tones and words, were discussed, even debated without rancor or a mean spirit. I handle myself with their model in mind. Sometimes my calm demeanor based upon rational thought triggers those who aren’t happy without either drama or the spotlight, to turn up the heat.

When this happens ‘in person’ I’m almost always successful in steering the conversation to calmer waters, or to its end. If it’s a phone conversation, I still succeed at that more than not, but less than face to face.

Anonymity in my experience can tell much about a person’s character. I was raised the old fashioned way. In our family you were just as likely to be scolded or given a quick swat on the butt by your aunt as you were your mom. We were taught that the true test of character is what you do when nobody’s watching. Of course with five ministers in the family, we all pretty much believed we were never really unobserved. 🙂 We behaved — even without witnesses. The lesson? Good character isn’t good only when the camera is on.

Which brings us to blogs. I’ll be brief and to the point.

Anonymity breeds false courage in some. They use this ability to become invisible to say things in print they’d never dream of in person. Most of them in real life have been dealt significant disappointments, mostly in real estate apparently. They fancy themselves as Lone Rangers fighting the good fight, fearlessly lobbing grenades at people whose good character allow them to write their thoughts (posts) in a public forum — and sign them with their real names. Their blogs not only identify who they are, but generally have an ‘about’ page which goes into more depth. In other words bloggers as a group, at least in real estate, are pretty transparent. Many even have their pictures on their blog’s home page. Character, pure and simple.

I’ve tried Grandma’s approach. Treat bullies and cowards Read more

January 29, 2007

Googling for Pizza

by

Realtor, Associate Broker

Author website

We had the extended family over for dinner last night. Being as it was (a Sunday), and being as I am (a real estate agent), this wasn’t a home-cooked foodfest, but Pizza Night. I always dread these gatherings, not because I don’t enjoy the company, but rather because I always suspect the “company” would rather be in pre-op than at my house knee-deep in take-out food and dog hair.

During the course of the evening, one of our cousins who we shall call “Barry” (we shall call him that because that is his name), was explaining how he had Googled me prior to his arrival because he couldn’t remember how to get to our house. Now, keeping in mind that Cousin Barry in a technical graphic designer and has some serious background in all things internet, my initial reaction was along the lines of exactly why he thought the keywords “Kris Berg” would return a link to the Mapquest driving directions to my home. Like much in life, we will just take that one on faith.

It is what Cousin Barry did find on his search for the pepperoni that I found amusing. He said, “I found your Blog”. Before I could fully puff my plumage with pride, he asked, “What’s up with the dog?”. (Insert image of befuddlement followed by getting-a-clue head bob). Ah! He found the Bloodhound Blog.

I consider this a victory of monumental proportions. When I started my own blog last April, I set baby-step goals, the first being to achieve search engine recognition. In the past eight years or so of having a fairly popular (locally), static website, searching for my name produced nothing at all related to me. Curses to those other imitators who share my name! Within a mere eight months, due entirely to blogging, the outcome is much different. Plug my name into Google this morning and four of the seven first page links are to me in some fashion (my blog, my website, the Bloodhound Blog, and Technorati). The other three spots sadly belong to some jazz music writer/arranger by the same name. Go to Read more

January 29, 2007

Derek Burress hits a grand slam with the Carnival of Real Estate Investing

by

Suburban Phoenix Real Estate Broker

Author website

Would you like to see a grand slam blog carnival presentation? Take yourself to Real Estate Perspectives for The Carnival of Real Estate Investing. Our own Michael Cook came in first place with The Right Time to Buy: An Investor Perspective, but I would rave about this carnival even if we hadn’t won. Host Derek Burress took the job seriously. He put in a lot of thought and effort to produce a carnival that is fun, funny and informative. Bravo!

My wife and business partner Cathleen Collins judges the Carnival of BloodhoundBlog, our own weekly in-house celebration of quality weblogging. Her pick this week is the Russell Shaw podcasts (Parts I, II and III). Cathleen and I both worked on those (for instance, she dug out all the links), but the real credit goes to Russell, who simply exudes wealth-building power.

As a reminder, BloodhoundBlog will be hosting next week’s Carnival of Real Estate and the February 19th Carnival or Real Estate Investing.

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January 29, 2007

Touchdown in Greensboro: What makes a good investment?

by

Real Estate Investor

Author website

The rubber has finally hit the road. After a lot of researching, speaking with agents, and working with mortgage brokers, I finally touched down in Greensboro. Armed with financial models, a few perspective properties, and a lot of appointments, I set off to find a good investment. Today, I want to talk briefly about what kind of property makes a good investment.

Keep in mind that a good investment for me may not be a good investment for you. Before you begin to look for your good investment, have a good understanding of your goals, timeframe, risk tolerance, and expertise. These three aspects make up the first step to finding a good investment. Investing should always be goal oriented. Goals help you focus your investing. If your goal is to become a millionaire in a year (not recommended) then your investment strategy needs to be very aggressively focused on leverage and Net Present Value (NPV). On the other hand, if you want to save for your child’s college fund or your retirement (Thanks Jeff), you may want properties that generate consistent cash flow in markets with a lot of potential buyers (easy exit and entry).

Additionally, timeframe and risk tolerance come into play as well. One person might be a skydiving, fast car driving risk loving young man, while another might be a little old lady looking to supplement her pension. A good investment will clearly be different to both of these individuals. While this is nothing new, it is surprising how many people do not truly understand the risk behind investments. Many people look at real estate investments as very low risk. Perhaps if you are buying core buildings in a major market, you might be able to be fairly certain of your cash flow. However, to capture those certain cash flows investors pay a significant premium up front in the form of a very low cap rate.

Besides meeting the above requirements, good investments are not obvious. Good investment properties require looking at a property and seeing something different than 90% of the investors who would normally look at that Read more

January 29, 2007

Time Really is Money

by

Real Estate Investor

Author website

This is a message to all the real estate agents out there. Timeliness represents professionalism. I bring this up today because I am still getting calls from emails I sent over a month ago to agents asking about assistance finding a property in Greensboro. From an investor prospective, first impressions are everything. If it takes you a week (God forbid a month?!) to get back to me with a simple request, why would I work with you?

When I look to buy an apartment complex, I know what I want and I always want to close quickly. An agent should be an ally in this process, not a stumbling block. Perhaps some agents out there think that the perception of busyness shows perspective buyers that they are hard workers. While that may be the case with some buyers, many buyers (especially me) are turned off by this. Additionally, since agents typically work hardest for buyers in their first month, what are buyers to expect after the second or the fifth month?

I’d like to think that I am easy to work with (my wife might disagree, but luckily I am the writer here). I do all of my financials, have good credit and easy access to financing, and know exactly what I want in terms of property. An agent could make an easy commission by simply spending half of a weekend showing me properties. Since I am sure many buyers try to portray this, I can understand why agents might be caution. But, is that an excuse for not being professional and simply following up the next day?

I will very soon be employed as an investment banker. I cannot imagine what kind of business I would be doing if I waited a week or more to call my leads back. Bottom line, a simple three minute phone call can get you off on the right foot. In this business reputation means a lot, and being elusive will send your reputation in the tank very quickly. Even the most outlandish request deserves the courtesy of a three minute phone call.

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Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

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